The Indian rupee is expected to open higher versus the U.S. currency on Friday as buoyant risk appetite dented demand for the safe haven dollar.

The rupee is likely to open just above 81.50, compared with 81.59 in the previous session.

Most Asian currencies were trading higher, while equities received a lift from the overnight rally on Wall Street that sent the S&P 500 index to its highest in just under two months.

The USD/INR pair will be "leaning leftwards" to begin the session, but it's difficult to see how it makes a major move below the 81.50 level, a trader at a Mumbai-based bank said.

As usual, you will see importers stepping on the opening dip, the trader added.

The dollar index, at one point on Tuesday, fell to its lowest since June on upbeat risk appetite after data showed the U.S. economy expanded at a faster pace in the December quarter than economists had expected.

The unexpected decline in weekly U.S. initial jobless claims, which will make the Federal Reserve officials more likely to strike a hawkish tone, did not help the dollar bulls either.

Meanwhile, U.S. core personal consumption expenditure (PCE), the Fed's preferred inflation measure, eased to 3.9% in the December quarter, from 4.7% in the prior quarter.

Relief on inflation is expected to lead the Fed to opt for a smaller 25-basis-points (bps) rate hike next week. However, analysts reckon the Fed will continue to signal that more rate hikes were likely.

"Unlike the Bank of Canada this week, we doubt the Fed is ready to signal a pause next week," DBS Group Research said in a note.

The Bank of Canada on Wednesday became the first major central bank to say it would likely hold off on further rate increases for now.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 81.62; onshore one-month forward premium at 11.25 paisa

** USD/INR NSE Feb futures settled on Wednesday at 81.7250

** USD/INR Fed forward premium at 12.5 paisa

** Dollar index at 101.8

** Brent crude futures up 0.2% at $87.7 per barrel

** Ten-year U.S. note yield at 3.51%

** SGX Nifty nearest-month futures up 0.3% at 18,014

** As per NSDL data, foreign investors sold a net $14 million worth of Indian shares on Jan. 24

** NSDL data shows foreign investors bought a net $134.1 million worth of Indian bonds on Jan. 24 (Reporting by Nimesh Vora; Editing by Savio D'Souza)